Last night Bloomberg reported BofA Unit’s Utah Foreclosures Violate Law, State Says.

A Bank of America Corp. unit is breaking the law by foreclosing on homeowners in Utah because it doesn’t meet state requirements, the state attorney general’s office said in a federal appeals court case.

ReconTrust Co., a subsidiary of Bank of America, the biggest U.S. lender by assets, isn’t a member of the state bar or a title insurance company and is unqualified to carry out trustee foreclosures, Utah Attorney General Mark Shurtleff wrote in court papers filed yesterday with the U.S. Court of Appeals in Denver.

Bank of America / Recontrust go on to say…

Bank of America, based in Charlotte, North Carolina, argued in court papers that it has the authority to conduct foreclosures in Utah under the federal National Bank Act. Under that law, only statutes of the state where the bank is located can be applied to fiduciary activities, Bank of America said.

No other state laws limiting or establishing preconditions are applicable to national banks, it said. ReconTrust is based in California and its trust operations for Utah foreclosures take place in Texas, according to the court filing.

Below are the case files from the appeal and the Attorney General’s Amicus Curiae in support of the homeowner and Utah state law that was filed on Wednesday.

I also included a letter from the OCC that states there is No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the Currency

From the OCC letter…


Pursuant to 12 U.S.C. § 371, national banks may “make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to * * * such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order.” The OCC’s real estate lending regulations provide that, “[e]xcept where made applicable by Federal law, state laws that obstruct, impair, or condition a national bank’s ability to fully exercise its Federally authorized real estate lending powers do not apply to national banks.” 12 C.F.R. § 34.4(a).

Section 34.4(a)(10) states that national banks “may make real estate loans under 12 U.S.C. § 371 without regard to state law limitations concerning * * * [p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages.” 12 C.F.R.§ 34.4(a)(10) (emphasis added). However, in no sense, under the facts presented, can the Banks be viewed as making a real estate loan under 12 U.S.C. § 371 and 12 C.F.R. § 34.4. The Banks did not originate the loans. They did not fund the loans at inception. Nor did they “purchase” the loans as part of any real estate lending program comprehended by the regulation. Here, the Banks act as trustees for the benefit of investors in the trusts. The substance of the transaction is that the investors, not the Banks, are purchasing the loans that have been made by Delta. The investors own the beneficial interest in the loans held by the Banks as trustees. And the effect of any liability for violation of the CFA ultimately falls on the investors. Nowhere do the Banks allege that they themselves, as opposed to the trusts they represent, are exposed to liability for any violation of the CFA. For all these reasons, 12 U.S.C. § 371 and 12 C.F.R. § 34.4(a) simply do not apply to the transactions by which the Banks acquired legal title to the loans in the circumstances at issue here.

With respect to the activities of Wells Fargo and Bank One as trustees, the banks derive their power to act as trustees from 12 U.S.C. § 92a. When state law conflicts with national banks exercising powers granted to them by federal law, the Supremacy Clause of the United States Constitution requires that the state law yield to the paramount authority of federal law, with the result that application of the state law to national banks is preempted. The Supreme Court has explained this principle stating that it interprets “grants of both enumerated and incidental ‘powers’ to national banks as grants of authority not normally limited by, but rather ordinarily pre-empting, contrary state law.” Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 32 (1996).

As the Supreme Court demonstrated in its review of preemption cases in the Barnett case, Supremacy Clause principles animating conflict preemption have been expressed in a wide variety of phrases that do not yield materially different meanings, including “stand as an obstacle to,” “impair the efficiency of,” “significantly interfere,” “interfere,” “infringe,” and “hamper.” See Barnett, 517 U.S. at 33. Thus, if application of the CFA to the loans held by the Banks as trustee were to obstruct, impair, condition, or otherwise interfere with the Banks’ exercise of fiduciary powers granted to them under federal law, the state statute would be preempted.

Based on the facts presented, we do not believe that to be the case. The Banks have not claimed that application of the CFA would impair their ability to act as trustee in these circumstances or that the state law otherwise interferes with the performance of their legal obligations as trustee. Nor could they claim that having to respond to state law defenses to recovery on assets held in trust obstructs or impairs their power to act as trustee absent some indication that the state law infringes their authority, conditions their actions, or imposes a burden in a way prohibited by federal law. In short, the Banks’ authority to act as trustees under federal law does not insulate the assets the Banks hold in trust for the benefit of investors from state law requirements otherwise applicable to those assets.

Matt Weidner had a good take on this document as well…


There is a growing body of evidence that stands for the proposition that the banks and shadowy trust companies sweeping across our nation to take homes are not in fact exempt from state banking and business regulation.  I have posted the Cuomo and Watters Supreme Court cases, but below is a very interesting letter from the Office of Comptroller and Currency which makes an even more compelling presentation of the facts.

Quite simply, we must continue to challenge the shadowy, unidentified anonymous entities that are filing suits and taking homes from Americans…..this letter should become a regular part of your research and pleading.

For more of Matt’s post go here…

Below is the REPLY BRIEF OF APPELLANT filed 11/03/10, BRIEF OF AMICUS CURIAE STATE OF UTAH filed 02/16/11, and the OCC Letter on Federal Preemption dated 01/14/05.



Brief of Amicus Curiae State of Utah

Reply Brief of Appellant

OCC Letter on Federal Preemption